This post is coauthored with Johanna Thoma and cross-posted at Choice & Inference. Accompanying Mathematica code is available on GitHub.
Lara Buchak’s Risk & Rationality advertises REU theory as able to recover the modal preferences in the Allais paradox. In our commentary we challenged this claim. We pointed out that REU theory is strictly “grand-world”, and in the grand-world setting it actually struggles with the Allais preferences.
To demonstrate, we constructed a grand-world model of the Allais problem....
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